How to sell your business: The founder’s survival guide
Our CEO Anthony Rose explains what you need to know about selling your business, to help you plan ahead. Anthony explain...
There are many reasons why you might want to sell your business, and it’s tricky to know when is the right time to sell. Sometimes things work out, sometimes they don’t, it’s part of the risk-reward rollercoaster of being an entrepreneur.
In this post, we’ll look at the current prospects for modest exits, not the IPOs or £1 billion sales. Instead, we’re talking about sales under £15 million, which are much more common, and how our new Exit service is a game-changer for founders selling these companies.
Traditionally, founders have three ways to exit a company:
With this as the status quo, founders who make a modest or distressed exit have been neglected. The high legal costs and the significant time and effort involved mean that any potential payout is eaten up by the cost of selling. Often it simply isn’t worth it – it’s easier to wind up the company.
Traditionally, it’s also been tricky to find buyers for your company – it isn’t as if you can publicise your intentions on LinkedIn. This makes a sale even more elusive.
The exits we read about are usually mega-exits – the 100X sales of unicorns, companies doing an IPO, or large private equity deals. But we believe all exits should be celebrated. If you’re a bootstrapping founder, an exit of a few hundred thousand pounds can be life changing. And even for investor-backed companies, if you sell for low multiple (3 to 5X), this can be great news – you’ll land the founders a few million, early employees with options can exercise and cash in their shares, and investors get a decent return.
The status quo needs to change, so we built SeedLegals Exit, the fast and easy way for founders and company owners to sell a company.
It’s now as straightforward to sell your company on SeedLegals as it is to do a funding round – the legal documents are standardised, automated and customisable, and our service includes unlimited help.
This means it’s now possible to sell, using top quality documents and expert support, for far lower legal costs and much less effort. This maximises your payout and drastically cuts down how long it takes.
Alongside the launch of our new Exit service, it’s becoming easier to find a buyer. There are now more services such as Foundy and Acquire which help sellers and buyers find each other. The future looks promising for micro and modest exits – you find the buyer, we do the rest.
Here’s what happens step-by-step when you sell your company on SeedLegals:
Before you find a buyer
When you’ve found a potential acquirer
After the sale
What happens with staff payouts and entitlements?
Whether your staff get a payout and/or keep or their entitlements depends on whether you’re selling shares or assets:
In a share sale, the buyer buys the company as a whole, including taking on all existing employees who will continue in their jobs and keep their entitlements.
In an asset sale, the buyer can purchase some or all of the assets of the company. What happens to the existing employees depends on what the buyer is buying.
If the buyer takes on the whole business or a whole business unit, the employees might be protected under the Transfer of Undertakings (Protection of Employment) regulations (TUPE). If TUPE applies, the buyer usually has to recognise previous service when it comes to entitlements such as redundancy, annual leave, unfair dismissal and notice of termination.
If the buyer is cherry-picking assets and isn’t buying the whole business or a business unit, TUPE might not apply. In that case, the buyer purchases the assets they selected, and existing employees remain with the company. You can then keep the employees on, for example if you continue to run the remaining parts of the business, or the employees could be let go under a redundancy or winding up process.
There’s more detail on TUPE for business transfers at the gov.uk website.
Senior Legal Associate,
In the exit market, corporate buyers know exactly what they’re doing but small company sellers often don’t. This knowledge imbalance puts founders and small business owners at a disadvantage. We’re changing that.
Just as we’ve revolutionised the legal process for fundraising and investment, SeedLegals is stepping up to empower founders with the tools and know-how to sell the business. We’re here to support your company’s journey from start to finish: from your Founders Agreements and Advanced Assurance to Exit. You might be years away from thinking about selling, but it’s good to know that when you’re ready, we’ve got it covered.
When you sell a company, it isn’t a time to experiment. You’ll want to stay in control and get the best possible support. That’s why it makes sense to choose SeedLegals.
Our team has worked on the legals for thousands of companies, not just at SeedLegals but our colleagues have years of previous experience at law firms and in-house for companies and investors. Plus some of us have built and sold companies too. Founders who choose SeedLegals benefit from this collective knowledge, and our specialists thrive on passing on this knowledge to founders.
When you kick off your sale with SeedLegals Exit, we’re here to help you understand what the terms mean, the implications for your sale and your employees, and when to push back in negotiations. Your decisions can be backed up with our extensive data: we know which terms are standard and what’s typical for companies like yours.
Our Exit service is now live on SeedLegals. We know selling your business is a major decision – if you’re ready to sell or just considering it, book a free call to find out more and talk it over confidentially with one of our experts.